by Amy Lillard
You've done all the prep work, researching a car you that is practical for your needs and affordable on your budget.
Now, how do you actually drive off the lot with your new car with a minimal amount of stress and fleecing?
With some simple steps that enhance your bargaining ability, you can say goodbye to raw deals at the dealership.
You know how much you want to pay and what cars are appropriate for you. Test out potential dealerships and salespeople by shopping around.
Send emails to the Internet managers, or contacts in online ads. Indicate the year and model you're looking for, as well as any special features, and what you are not too concerned about. Ask what inventory they have on their lot. Take careful notes when the dealers call or email in return, including the specific cars, colors, options and dealership names.
While you're doing this, determine if the person calling you is someone you want to do business with. Are you comfortable with them? Are they impatient and pushy? If you asked them about a specific car's availability, did they respond to your needs or try to steer you in another direction? Do they answer your questions in a straightforward manner?
If you find a match of an agreeable salesperson and an intriguing car, set up a test drive. At that time, continue to gauge your comfort with the salesperson.
Selling your car outright will get more cash. Period. But there are benefits of trading in to the dealership, including the convenience. Ensure you have an accurate estimate of a trade-in price from the blue book or online calculators such as that at Edmunds.com. At this site you can plug in mileage, options, condition and colors to get a “true market value” appraisal. Consider shopping your trade-in to multiple dealerships if a good deal is important to you and your plans.
The dreaded negotiation looms, but with some key tips you can be in good shape.
Many buyers rely on printed-out web listings to show dealers firm vehicle costs. This can be a powerful leverage, and buyers can go from dealer to dealer, comparing prices listed on the web, or estimates provided over the phone.
An even more powerful leverage? Understanding how dealers come up with car prices.
The sticker price is never the amount you must pay. According to Jeff Ostroff, manager of CarBuyingTips.com, the dealer's actual cost is the invoice price (NOT the sticker price) minus dealer incentives, minus factory holdback. For example:
Sticker Price = $22,385
Invoice Price (found on InvoiceDealers.com for specific make and models) = $19,922
Dealer Incentive (“Factory to Dealer” Incentive) = $500
Holdback (a percentage of the sticker price – 2%) = $447
Dealer's Actual Cost: $19,922 (invoice price) - $500 (incentive) - $447 (holdback) = $18,975.
Ostroff recommends a formula for negotiating a price that benefits both you and the dealer: Dealer's Actual Cost + destination charge + 5%. The destination charge is a legitimate charge the dealer must pay that is not recouped from the factory or dealership. In the example above:
Five percent of $18,975 = $949.
Destination Charge = $455
Offer is $18,975 + $949 + $455 = $20,379.
Offer this price, with firm numbers showing your figures, and both parties benefit.
Remember the additional expenses. Besides the cost, you will have to pay sales tax and various fees, depending on your state. Ask the salesperson to fax you a worksheet and invoice before you go to the dealership. This way, you'll be able to review the figures in a relaxed environment.
When you're ready to sign on the dotted line, get ready to keep signing. In addition to the contract, you'll be presented with a substantial pile of papers to sign. Make sure the numbers are what you agreed to. Take the time to understand the forms you're signing, and ask questions if you don't understand. In addition, if you are signing with the finance and insurance (F&I) manager, they'll probably try to sell you additional things: extended service contracts, fabric protection, alarms, or more. The only additional purchase you should truly consider is the extended warranty, which can provide peace of mind for the cost.
Wait! Before you drive off, take one more chance to look for scratches, dents or dings, or anything missing. Then, once you're satisfied, you can drive off in full comfort and enjoyment.
Learn more about other problems and opportunities presented with automobile purchasing and financing with our continuing series, including steps to leasing new cars, buying used cars, financing options, types of loans and leases, and more.
A frequent contributor to ERATE® since 2006, Amy Lillard is a freelance writer specializing in turning complex information into useful tips and tricks for readers. For questions or topic suggestions, contact Amy at [email protected].